Two insurers disagreed on which was responsible for defense costs in the underlying personal injury suit against the insured. Nautilus Ins. Co. v. Westfield Ins. Co., 2017 U.S. Dist. LEXIS 158480 (E.D. Pa. Sept. 27, 2017).
Knerr Group, Inc. lease property to Podcon, Inc. pursuant to a written lease. A man named Anthony Postell suffered an injury in an accident on the premises during the term of the lease. Postell filed a personal injury action against Knerr and Podcon, among others. Nautilus provided a defense to Knerr in the Postell case pursuant to a policy Nautilus issued to Knerr. Podcon was insured by Westfield.
Knerr requested a defense from Westfield, claiming it was an insured based upon certain provisions in the lease with Podcon. The lease required Podcon to secure liability policies to cover the property. The Westfield policy's "General Liability Expanded Plus Coverage Endorsement" provided that "[a]ny person or organization" that Podcon "agreed in a written contract to name as an insured" was an additional insured under the policy. Such coverage, however, only extended to "liability arising out of the ownership, maintenance or use of that part of the premises leased" to Podcon.
Nautilus' complaint sought a declaration that Knerr was an insured under the Westfield policy and that Westfield was obligated to defend Knerr in the underlying case.
Westfield sought to dismiss the case under Rule 12 (b) (1) because Nautilus lacked standing to assert its claims as it was seeking a declaration of Knerr's legal interests rather than its own. But Nautilus alleged it had suffered a concrete monetary injury as a direct result of Westfield's allegedly wrongful denial of coverage to Knerr. These allegations were sufficient to establish that Nautilus was asserting its own legal interests rather than those of a third party.
Dismissal was also sought under Rule 12 (b) (6) because Westfield's policy and the lease demonstrated as a matter of law it was not obligated to cover Knerr as an additional insured. The complaint, however, alleged that the lease required Podcon to add Knerr as an additional insured. Westfield conceded that the Expanded Endorsement would require it to provide coverage to Knerr if Podcon agreed in the lease to name Knerr as an additional insured.
The lease required Podcon to maintain certain liability insurance. It further stated that all insurance policies would name the tenant as the insured. Because the lease did not clearly state that the tenant was obligated to designate the landlord as an additional insured, Westfield argued that the plain language of the lease unambiguously contradicted Nautilus' allegation that Podcon was required to name Knerr as an insured. The court agreed that the lease was ambiguous because the sentence requiring the designation of additional insureds was incomplete. Although the sentence listed a series of entities, it did not contain a predicate verb indicating what, if anything, was to be done to or by those entities. Therefore, the sentence was ambiguous.
Accordingly, the court concluded that the complaint plausibly alleged that the lease amounted to an agreement that Podcon would add Knerr as an additional insured under Westfield's policy. Westfield's motion to dismiss was denied.
